CD067: What Do We Want In Ukraine?

The United States appears prepared to restart the Cold War and loan at least $1 billion of our tax money to Ukraine through the International Monetary Fund (IMF). Why? In this episode, we look at what we’re asking for in Ukraine in return for our generosity.

The International Monetary Fund (IMF) loans struggling countries money but in return the IMF demands that the country change its economic laws to make them much more corporate friendly. As explained in the The Shock Doctrine by Naomi Klein, there are three economic principles that the free marketeers want their target countries to adhere to:

Governments must remove all rules and regulations standing in the way of the accumulations of profits.

Governments should sell off any assets they own that corporations could be running at a profit.

“You know that we resumed talks with the IMF, we do understand that these are tough reforms, but these reforms are needed for the Ukrainian state. We are back on track in terms of delivering real reforms in my country. Probably in the near future, next week, or in ten days, Ukraine is to sign the political part of an association agreement with the European Union and we want to be very clear that Ukraine is and will be a part of the Western world.” -Interim Ukrainian Prime Minister Viktor Yanukovich, March 12, 2014

Our government is supporting this new government. Here’s my answer to “Why?”.

And yes, that’s the other thing. Ukraine’s natural gas industry is nationalized. Ukraine’s natural gas belongs to the state, it belongs to the government, it belongs to the people. In fact, in 2011, Ukrainians passed a law that said that all natural gas fracked in Ukraine must be sold to Ukrainians. No exports allowed. What that means for The People is that they will be able to use their own resources for energy – become energy independent, if you will. What that means for multinational fossil fuel corporations is that they can’t profit from exporting Ukraine’s nationalized natural gas.

Second, agriculture is big business in Ukraine. Ukraine has been nicknamed the “breadbasket of Europe” for centuries and in January, The Financial Times called Ukraine “one of the world’s most promising agriculture commodity producers”. The reason is that in 2013, Ukraine had their best year ever for corn. The market is practically drooling over the prospects of getting control of this land. Morgan Williams, President and CEO of the US-Ukraine Business Council – the group I think is really calling the shots here – said, “The potential here for agriculture/agribusiness is amazing … production here could double. The world needs the food Ukraine could produce in the future. Ukraine’s agriculture could be a real gold mine.”

So Ukraine is a country with huge, untapped natural gas reserves, which can be easily transported and sold to Europe since Ukraine already houses two of the most important gas pipelines which transport natural gas from Russia to Europe. Ukraine is also a country with fertile land in a time when other “breadbaskets of the world” are either flooded or withering in drought. Add to that Ukraine’s educated workforce ripe for corporate slavery and you’ve got a country that the market would love to take advantage of. This is why Ukraine is a target. This is why we’re involved.

Other goals of the IMF include the “repeal of burdensome government regulations”, “wage and employment restraint”, which translates to lower wages and cutting of Ukrainian government jobs, via “reforms and reductions” in the health and education sectors, which make up the bulk of public employment in Ukraine.

These new laws are in addition to the new laws the IMF had already gotten from the recently ousted government. Ukraine already reformed their pension system by raising the retirement age for women from 55 to 60, lowered corporate tax rates in 2010, laid off 30,000 public employes in 2011, and privatized Ukraine’s 11th largest bank in 2011- selling it to a titanium business tycoon who gobbled up Ukraine’s government-owned titanium in a fire sale of Ukrainian state assets that took place in 2004.

Nondiscriminatory Access to Gas Transportation System – due January 1, 2012

Horizontal Unbundling of Gas Sector – separating the gas production and marketing from the “natural monopoly” of transportation, to begin with (privatization is prohibited for transportation infrastructure)

February 2011: Ukraine became a full member of the Energy Community, an organization formed at the initiative of the European Union to extend the EU internal energy market to southeastern Europe and beyond. The gas market law was a precondition of membership of the Energy Community.

June 2011:Gas Market Law allows Ukraine’s state-oil company to export Ukraine’s natural gas.